Top banks’ H1 commodity revenue slides 41 percent to lowest since 2006

07 Sep, 2017 8:18 am

LONDON (Reuters) – Commodities-related revenue at the 12 biggest investment banks tumbled 41 percent year-on-year in the first half of 2017 to its lowest since at least 2006, a consultancy said on Thursday.

The decline was mainly due to a drop in client activity and a slump in trading performance in the energy sector, financial industry analytics firm Coalition said in a report.

Revenue from commodity trading, selling derivatives to investors and other activities in the sector fell to $1.3 billion (997.16 million pounds) in the first six months of the year, it said.

“Revenues reached their lowest level since 2006 because of ongoing weakness in energy, in particular natural gas, owing to lower volatility, reduced client activity and trading underperformance,” Coalition said.

The company has been analysing bank data since 2006. Coalition did not mention any individual banks, but in the second quarter, Goldman Sachs Group Inc posted the weakest commodities results in its history as a public company.

Banks’ commodity revenue has been on a steady downward path in recent years as they have exited or slimmed down their commodity business due to heightened government regulation and poor performance from the sector.

In the fourth quarter of 2016, commodity revenue jumped 20-25 percent, largely due to an improvement in U.S. power and gas activity. But it declined 7 percent for the whole of 2016 due to weakness in the oil sector.

Coalition tracks Bank of America Merrill Lynch, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Societe Generale and UBS.

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